In an extraordinary breakthrough in an extraordinary case, a 50-year-old Australian man named as Paul "Doug" Peters has been arrested in the United States over the collar bomb hoax on Sydney schoolgirl Madeleine Pulver.

Mr Peters, who police say does business in Australia and the US, was arrested near Louisville, Kentucky, about 5.30am AEST today (3.30pm on Monday Kentucky time) by an FBI SWAT team and two detectives from the NSW Robbery and Serious Crime Squad's Strike Force Haddon.

FBI special agent Elizabeth A. Fries, who named the man, said he had been staying at his ex-wife's house in Heather Green Boulevarde, La Grange, a town of 5000 people, 48 kilometres north-east of Louisville.

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Police confirmed the man, who they did not name in a Sydney briefing, had not been a suspect until he left Australia on August 8, after which he was placed under surveillance.

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He is now in custody and will face a Louiseville court about 9.30am tomorrow morning (11.30pm AEST on Tuesday), when NSW Police will seek his extradition to Australia to face charges of aggravated breaking in and entering, and kidnapping, FBI and NSW Police officers said at a press conference in Kentucky.

The fake bomb was attached to Ms Pulver's neck by a balaclava-clad intruder in her family's home at Mosman on Sydney's north shore on August 3. After 10 hours, during which police officers sat with the teenager while specialists worked on the device, the collar was found not to contain any explosives.

Madeleine Pulver on her way to school one week after her ordeal. Police have now made an arrest in the US. Photo: Nick Moir

Madeleine's father, Mr Bill Pulver, said today the family was "enormously relieved" that an arrest had been made. He thanked the police for their superb work during a "frightening" ordeal for the family.

He said the family had been "humbled by the selflessness and generosity of those who wanted to help Maddie in any way they can".

"This has been a baffling and frightening experience," Mr Pulver said.

"It has tested us all but we have been overwhelmed by the love and support that we've received from family and friends, our neighbours, the school and the local community."

It's a fairly detailed chain of circumstantial evidence that has led us to making the arrest this morning.

He said at times the intense media interest in the case had been difficult but on the whole the media had been respectful and had portrayed Maddie as the vibrant young woman she was. He asked for privacy and said the family would make no further comment.

NSW Police Assistant Commissioner Dave Hudson told a packed media conference in Sydney today that the suspect was surprised when he was confronted by police today.

Arrested ... Paul "Doug" Peters. The image has been pixelated for legal reasons.

Mr Peters, who flew between Australia and the United States for work and has family in both countries, had been living in Sydney for six weeks before August 3.

While he declined to elaborate on what made police suspect Mr Peters, Mr Hudson said police were "confident that he is responsible for the crime" and that no other suspects were being sought.

The bomb hoax was still being treated as an extortion attempt and Mr Peters had not been known to police before this case.

Some connection with family

Mr Peters had some connection to the Pulver family, but no "direct links". He was not believed to have been inside the Pulver home before.

Mr Hudson would not comment on questions about whether Mr Peters had any business links with Mr Pulver, the chief executive of Appen Butler Hill, a linguistic software company that specialises in voice recognition software.

"The ins and outs of motive are yet to be determined and that's part of our ongoing investigation," Mr Hudson said.

"We will allege through the courts ... [he] was responsible for entering the Pulver home and placing the device around [Ms Pulver's] neck."

He would not outline exactly how police came to identify Mr Peters and would not comment on whether his fingerprints were found on the device.

Mr Hudson said the extradition process was "not an exact science" and it could take some time.

'True offence'

He said police had treated the bomb hoax as a "true offence" from the beginning and Ms Pulver's statement helped them make the arrest.

NSW Police Detective Superintendent Luke Moore, who flew to the US for the arrest, told the media in Kentucky that Mr Peters had family connections in Kentucky, and he had lived in the United States at one time.

He said there was no evidence that Mr Peters' ex-wife was involved in the incident.

She was not at the home when Mr Peters was arrested peacefully by the FBI SWAT team.

"It was fairly normal. The FBI effected the arrest and I believe Mr Peters was the only person in the house at the time," Superintendent Moore said. "The arrest was done fairly swiftly and safely."

Working with FBI

A delighted NSW Police Commissioner Andrew Scipione praised his officers and those of the FBI.

"They have worked with us [over] every request. ... They made our job just that little bit easier," he said.

He added that this was a "very good day for the NSW Police Force" and, quoting the NSW Police motto, said: "Justice swiftly follows crime."

Today's arrest came after reports a computer was seized by police on the NSW central coast over the weekend.

On Friday, police confirmed reports that investigators had a suspect, but had not spoken to the person yet. It followed a report Ms Pulver told police her attacker had "old, wrinkly eyes".

Shortly after the incident, it was also revealed that a long, typed note with strict instructions and signed by fictional character Dick Struan from the 1966 novel Tai-Pan had been pinned to Ms Pulver, 18, during her ordeal.

The Pulver family was based in New York for a few years from 2002 when Mr Pulver was president and chief executive of NetRatings, an audience ratings company.